Is Forex Trading the Same as Gambling?

Is Forex Trading the Same as Gambling?
4.5 (90%) 2 vote[s]

The opinions regarding Forex are ambiguous. Some people are deeply convinced that the Forex market is a profitable way to make money, others believe that it is just a gamble.

What is Forex

Trading on Forex is based on the speculative principle: buy cheaper, sell more expensive. The Forex market is a foreign exchange market where the currency is a commodity. The advantage of the Forex currency exchange is low entry threshold.

However, as in any business, trading on Forex is associated not only with great opportunities but also with great risks.

Differences between Forex and Gambling

Gambling is a game of luck, Forex trading involves a thorough analysis. The currency of any country depends on many factors: macroeconomic indicators, the political situation etc. Traders use the economic calendar to keep abreast of all the significant upcoming events. The economic calendar can be found on analytical resources and websites of forex brokers, for example at JustForex website.

On Forex only discipline and patience will help a trader to earn. It is necessary to follow strict rules, to be psychologically stable and to control risks. The gambler is well aware: he can take the risk and win or risk and lose. The trader will take risks reasonably and only if he is sure of the profit. Let’s consider the basic traits of the professional trader.

  1. A trader follows the trading plan

    Trading without a plan and goal will lead to losses. Compared to a gambler who acts chaotically, the professional trader has his own trading plan, which he constantly adheres to.

  2. A trader has an effective trading strategy

    In order to make successful transactions on Forex, the trader needs to work upon a trading strategy. To create a good trading strategy, you need to understand how technical analysis works and what forex trading is. You can find this information on websites such as Investopedia. Furthermore, you can go through forex forums (Forex Factory or Babypips) and get answers to your questions.You can create your own strategy, or use the ready-made and change it according to your requirements. Using a specific trading algorithm and sticking to it help to analyze mistakes in order not to make them in the future.

  3. A trader manages risks

    In the Forex market, it is important to minimize risks and maximize profits. Risk management is an important stage in Forex trading. If the trader doesn’t follow the rules of risk management, he is gambling in fact. Before opening an order, traders should closely calculate the possible profit and possible losses.

    Traders also use stop-loss orders to fully control the risks while trading. These orders are aimed at limiting losses in case the price goes against the trader.

    Besides, it’s highly important to choose the reliable Forex broker. Read the reviews on different forums before becoming their client (Example, JustForex review).

  4. A trader controls emotions

    Gamblers often allow emotions to take over, giving way to fear and greed, which inevitably leads to losses. Traders should be calm and patient and know when to risk and when not.

    It is impossible to trade profitably and manage risks without high concentration and organization.

  5. A trader analyzes his trades

    Analysis of trades gives the opportunity to clearly assess trading. A thorough analysis of trading activity allows the trader to see the effectiveness of the trading strategy he used, as well as identify mistakes, understand the shortcomings in the technical analysis.

Conclusion

Before you start working in the financial market, you need to go through a difficult path as in any other profession. And it takes a lot of time and effort. To earn on Forex, you need to study its mechanisms, understand the basics and treat it as a job, not as a game. People often use demo accounts in order to get the necessary experience at no charge. Anyway, to become a professional you have to work hard and improve yourself. Stable profits are the result of hard work.

Spread the love
 

Related Articles

Leave a Comment